KATITAS (TSE:8919) Is Due To Pay A Dividend Of ¥28.00

KATITAS CO., Ltd. (TSE:8919) will pay a dividend of ¥28.00 on the 11th of June. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

See our latest analysis for KATITAS

KATITAS' Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by KATITAS' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 9.7%. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.

KATITAS' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was ¥13.69, compared to the most recent full-year payment of ¥56.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. KATITAS has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See KATITAS' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that KATITAS has been growing its earnings per share at 5.8% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for KATITAS that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.